Yes, it is. In the end of disc 2 you can re-enter Midgar before you have to go kill Hojo. And yes, the key is in Bone Village, in the corner formed by the wrecked plane wing. Not that there's much you can do once you're there, but you can get TIfa's ultimate weapon in the vending machine that used to shot you at the beginning of the game and find out why the guy in the tube was feeling sick, which is kind of interesting because it makes you wonder "How did he get there?!?"